Activists with Housing Justice Maine call on state lawmakers in 2021 to fund more affordable housing. | Beacon
Originally published in the Maine Beacon on May 20, 2023
Dusting off an old idea, Maine could join a list of cities and states across the country that are taking matters into their own hands to address soaring housing prices by becoming public housing developers.
Democratic Rep. Grayson Lookner of Portland introduced LD 1867 to the Select Committee on Housing in a public hearing on Friday. The proposal would establish the Maine Community Housing and Rural Development Authority, which would create publicly-owned housing that the tenants themselves would manage.
“This ain’t your grandpa’s public housing,” Lookner told committee members, who have been tasked with finding solutions to the state’s housing emergency, which threatens to spiral out of control with rental prices skyrocketing and evictions spiking.
There is currently a shortage of over 20,000 affordable housing units in the state and homelessness is growing.
“This program avoids many of the pitfalls that undermine public housing nationally, such as income and racial segregation, systemic underfunding, and lack of resident governance,” Lookner said.
As Beacon previously reported, the approach is a drastic departure from the way Maine has built affordable housing for the last several decades. Since new public housing development was halted at the federal level in the 1990s, Maine policymakers have tried to meet the demand for affordable housing with the federal Low-Income Housing Tax Credit (LIHTC), a Reagan-era tax incentive that pushes public money to private developers to build temporarily affordable housing.
Tax credits are the only tool left. And they build 90% of all affordable housing in the country.
Gov. Janet Mills’ recent budget proposal calling for $80 million for new affordable housing would all be funneled into LIHTC and similar tax credits, which is the state housing authority’s only current means to build housing.
The problem, critics say, is that the tax incentives are inefficient and prone to abuse. Because it is tied to demand in the private housing market, LIHTC produces fewer units than they did 20 years ago, while costing the public 66% more through tax subsidies.
“It is not a coincidence that we find ourselves in the housing crisis that we are in today when looking at the housing policies that were implemented federally 40 years ago,” Lookner said. “Low-Income Housing Tax Credit developments often only stay at affordability for 15 to 45 years and federal public housing has been left to die a slow death by a thousand cuts since the 1980s.”
Lookner has modeled the proposal off a pilot program in Montgomery County, Maryland where local officials leveraged an initial $100 million investment in public money to create a revolving fund to build publicly-owned, mixed-income apartments in the suburbs of Washington, D.C.. After just a few years, Montgomery County officials — who presented to Maine’s Select Committee on Housing in March — say they are on track to own 9,000 apartments — all of them permanently affordable.
The key difference between Montgomery County’s public-developer model and previous federal housing projects is that it is open to tenants of different incomes, not just low-income residents. At the behest of the real estate industry in the 1930s, federal housing projects were designed to serve only the poorest of the poor. The result was concentrated poverty and racial segregation.
Under the new model, residents pay different rates in a funding process called cross-subsidization, where the higher rents pay for the lower rents. Once initial public funds are put in, cross-subsidization covers the apartment complex’s day-to-day operating expenses, allowing it to break even or potentially return a profit — which could then be used to fund other mixed-income developments.
Lookner said the public developer proposal would benefit rural communities in particular since, because it uses public money free of the whims of the market, it would avert the problems inherent to private development, where deindustrialization and capital flight has made large swaths of rural Maine unattractive to private investment.
Lookner’s proposal would be available to renters making 120% of the area median income, whereas many LIHTC developments are only available to renters making around 60% AMI.
“The authority would also create housing for the storied ‘missing middle’ of income earners, as this is not a type of housing that is usually funded by either tax credit deals or by market-rate development,” he said.
Because the model could provide housing to their middle-income members, the state’s largest nursing union, the Maine State Nurses Association, is backing the bill.
Seattle, California, Colorado, Hawaii and Rhode Island have either passed or are exploring public developer models similar to the one piloted in Montgomery County. A social housing ballot initiative in Seattle won handily in February. Last summer, the Rhode Island General Assembly passed a $10 million pilot public developer. And Colorado recently created the Middle Income Housing Authority, which plans to build 3,500 units of workforce housing.
Josie Phillips, a budget and tax policy fellow at the Maine Center for Economic Policy, said that the spate of recent public developer proposals resembles the examples of social housing found across the globe — such as in Austria where public housing is available to nearly 80% of its citizens — rather than the American version of underfunded and racially segregated public housing.
“A policy brief from the [Organization for Economic Co-operation and Development, an intergovernmental organization with 38 member countries, including the U.S.] considers social housing to be ‘a key part of past and future housing policy,’” Phillips told lawmakers.
“Ultimately, social housing is not going to be a magic bullet, but used in concert with other strategies, it can be an effective piece of the puzzle when it comes to addressing the affordable housing crisis,” she added.
The Kennedy Park public housing development in Portland. | Courtesy of the Portland Housing Authority
Originally Published in the Beacon on January 23, 2023
One major potential solution to the state’s runaway cost of housing never seems to get discussed by Maine lawmakers: Public housing.
For decades, the idea of building new publicly-owned, permanently affordable housing has been off the table, even as housing prices ballooned before the Great Recession of 2008 and have now reached new heights in Maine and across the country with national average home sale prices increasing by 35% in less than two years.
Large federal housing projects designed to serve only the poorest of the poor had become synonymous with urban blight, dilapidated highrises, crime and racial segregation. This seemingly unshakeable stigma opened the door for public housing’s dismantling under president Ronald Reagan and Bill Clinton, who banned its expansion with the 1998 Faircloth Amendment.
Kennedy Park in Portland was built in 1965 as a public housing project after much of the Bayside neighborhood was cleared of slums.| Courtesy of the Portland Housing Authority.
Left without a public way forward, state and local officials in Maine and across the country have searched for solutions to a worsening housing crisis in the private housing market. The centerpiece of last year’s legislative campaign by Maine’s Democratic leaders to increase the housing stock was passing a law altering local single-family zoning rules to allow for the private development of accessory dwelling units.
Those zoning changes to increase housing density were paired with the allocation of additional federal COVID relief funds to MaineHousing, the state’s housing authority, to build more affordable housing through the agency’s existing public-private partnerships, in which they issue tax subsidies to private developers to keep prices low.
Yet there is still a staggering shortage of affordable housing units for sale or rent.
Housing remains a top priority for lawmakers again this year. Fifty-eight percent of Maine renters are considered low income with severe cost burdens, according to the National Low Income Housing Coalition. And housing costs continue to outpace average household income in almost every Maine county, according to MaineHousing. This will likely only get more severe as rising interest rates make mortgages more expensive and shrink new construction.
And this is why Rep. Grayson Lookner (D-Portland) believes that a public housing option needs to be put back on the table.
“Maine has been in a housing crisis for a long time and it’s only become more and more pitched as time progresses,” Lookner said. “For the longest time, our elected officials at all levels were content to just throw their hands in the air and say, ‘We can’t do anything about it.’ Just letting the developers, landlords and real estate agents dominate the whole discussion.”
Lookner sits on the legislature’s newly established Select Committee on Housing, which was formed to address the housing crisis and consider a slew of recommendations and proposals this year to study land use, increase housing density, mitigate the impacts of short-term rentals, and provide rental assistance.
“It’s a real piecemeal approach. We’re sort of nibbling around the edges and we’re not getting to the heart of what’s causing the crisis, which is the commodification of housing,” Lookner said. “The U.N. has recognized that the commodification of housing is a human rights issue. And it’s not unique to Maine.”
Lookner has submitted legislation to establish the “Maine Community Housing and Rural Development Authority.” While the details of the bill have not yet been published, Lookner said the plan is to create a revolving fund to build mixed-income housing. Unlike MaineHousing’s development model, this proposed public developer would maintain ownership of the housing it develops which would be governed by the renters themselves.
The issue of ownership is key, public housing advocates say, as the private-ownership development model that the U.S. has pursued for the last four decades has created an expensive and inefficient way to provide low-income housing. And it produces nowhere near enough.
The end of public housing and the turn to the market
Built by the federal government in 1943 as wartime housing for shipyard workers, Sagamore Village in Portland is now owned by the Portland Housing Authority and provides low-income housing to 200 families. | Courtesy of the Portland Housing Authority
The U.S. has never really done workforce housing. Unlike the well-maintained examples of “social housing” around the globe such as in Austria, where 80% of the country’s population is eligible to live in community-owned housing, public housing here has always been restricted to the very poor.
This was by design. The real estate industry in the 1930s pressured Congress to exclude middle-class residents from housing projects because they didn’t want to compete with the public sector. Limits were also placed on how much could be spent per housing unit. Concentrated poverty led to the segregated and underfunded housing projects that have defined the American model since.
Now, with the Faircloth Amendment blocking new federal public housing, local housing authorities manage a dwindling number of properties funded by the U.S. Department of Housing and Urban Development and administer long waitlists for Section 8 rental assistance vouchers.
“From the 30s through the 80s, public housing authorities were in high gear, building a lot. Now, they’ve basically cycled down to first gear,” said Paul Williams, the founder of the Center for Public Enterprise, a think tank that advocates on behalf of public goods and services. “They don’t really do much of anything, for the most part. They just manage an existing portfolio of housing and handout vouchers to the next person on the list.”
There are 27,000 Mainers currently on the Section 8 waitlist. People also spend years on waitlists for the few remaining public housing options in Maine, which prioritize the elderly, people with disabilities and low-income families with small children.
As large-scale public housing development fell by the wayside, policymakers attempted to fill the void with the Low-Income Housing Tax Credit (LIHTC), a program introduced by HUD under the Reagan administration. The tax credit today produces 90% of the nation’s affordable housing.
Local housing authorities like MaineHousing use the federal tax credits to entice private businesses to build affordable housing. LIHTCs offset construction and operation costs so that developers can put the units on the market at an affordable rate. Developers are required to maintain those rates for 15 to 30 years.
“It’s pure Reaganomics,” Lookner said. “It’s so the biggest and most profitable developers can get handouts to create temporarily affordable housing.”
Several states have tried to address the limitations of the prevailing public-private model through various fixes. These include placing covenants on LIHTC housing to keep it affordable for longer periods.
But critics of the LIHTC model say these fixes don’t get to the root of the problems inherent in relying on the market to produce affordable housing — namely that it is inefficient and doesn’t receive nearly enough federal funding to produce enough housing to meet the overwhelming need.
After the financial crisis of 2008 and the collapse of a housing bubble, demand for LIHTCs plummeted as the construction industry tanked. As a result, LIHTCs now produce fewer units than they did 20 years ago, while costing the public 66% more through tax subsidies. The program produced more than 70,000 housing units nationwide in 1997, but that number fell to 59,000 in 2014, according to the National Council of State Housing Agencies.
Desperate to meet the demand for low-cost housing, state and local officials from around the country have begun to look outside of the LIHTC program for solutions.
They’ve rediscovered an old idea.
Social housing in America
A rendering of a publicly-owned, mixed-income apartment building in Montgomery County, Maryland. | Courtesy of the Montgomery County Housing Opportunities Commission
A few years ago, a housing authority in Montgomery County, Maryland leveraged $100 million in public money to create a revolving fund to build publicly-owned, mixed-income apartments in the suburbs of Washington, D.C.. County officials have been slowly building a portfolio of mixed-income properties and they are on track to own 9,000 apartments over the next few years.
Since they’re not using federal money, Montgomery County’s public housing expansion is not blocked by the Faircloth Amendment.
And similar to the social housing seen around the globe, the key to Montgomery County’s success has been creating publicly-owned housing for all income levels, not just low-income residents.
Williams explained that a process called cross-subsidization makes their apartments sustainable without being dependent on federal funding to stay afloat. Residents pay different rates. While the rents in LIHTC buildings that only serve low-income residents will never be enough to cover the building owner’s debt payments and operations and maintenance costs, Montgomery County’s cross-subsidized buildings can cover those costs.
“If you set aside, say, a third of the homes for people below the poverty line, a third for people near the area’s median income and a third for people above it, you can break even — or even come out on top, bringing in funds to help finance another mixed-income project,” Williams wrote in Noema Magazine last year.
The mixed-income model also pushes back on several of the old problems associated with public housing in the U.S., Williams said, namely racial segregation and the concentration of poverty.
While the fledgling attempt at social housing in Montgomery County has caught the notice of housing advocates around the country, Williams warns that the model is operating at nowhere a large enough scale to take the place of LIHTC developments, which still make up the vast majority of new affordable housing in the country. For the moment, he thinks advocates need to see locally-initiated public housing as a supplement to existing federal programs. And such efforts should be pursued in conjunction with rent control, zoning reform, short-term rental regulations and a host of other ideas communities are trying.
“My pitch is that publicly-produced housing allows states and cities to produce more affordable housing than they would otherwise be able to with the existing federal subsidies. It’s a way to kick local housing authorities back into high gear,” he told Beacon.
Williams added that scaling up public developers like the one in Montgomery County will take time. “This is by no means an overnight solution — it requires careful planning, competent bureaucracy, an expansion of state capacity and decades of time to grow our portfolios and house the many,” he wrote. “But it is a way out of the mess we are in.”
States are becoming public housing developers
Several states and cities are now following in the footsteps of Montgomery County to become public housing developers.
California, Hawaii, Maryland and now Maine have all introduced legislation to build social housing. Colorado recently created the Middle Income Housing Authority, which plans to build 3,500 units of workforce housing. Seattle voters will weigh in on a referendum in February to build renter-governed housing.
Last summer, the Rhode Island General Assembly passed a $10 million pilot program as part of the state’s budget to build mixed-income public housing. The proposal was advanced by state lawmakers with grassroots support from Reclaim RI, an activist group formed by local leaders of Vermont Sen. Bernie Sanders’ 2020 presidential campaign.
Affordable housing construction in Sacramento. | Mark Hogan, Creative Commons via Flickr
“It’s clear that the private sector, even when it’s booming, is neither willing nor — perhaps better put — able to build enough housing, let alone for the people who need it the most,” said Reclaim RI co-chair Daniel Denvir. “It’s just simply a fact that only the public sector has the potential to build our way out of this housing crisis.”
Reclaim RI is backing a revised piece of legislation this year that would expand on last year’s pilot. The proposal includes using COVID relief funds to establish a permanent revolving fund for a public housing developer and creating a land bank to acquire “unimproved land” or properties that are “tax delinquent, tax foreclosed, subject to municipal receivership, vacant or abandoned.”
Denvir said he has been surprised at the broad-based support the proposal has received so far.
“I think it is really remarkable that certain things that were previously unthinkable — like new forms of public housing which have been unthinkable since the rise of neoliberalism — suddenly become thinkable and then doable,” he said.
It remains to be seen how much support a proposal for publicly-developed housing in Maine will gain. Lookner said the housing situation here is as dire as anywhere, and hopes Mainers will be ready to see the tarnished ideal of public housing in a new light.
“Maine has been one of the least affordable states in which to live when comparing rents to wages. This is not news to anyone,” Lookner said. “It’s time to see the problem is the commodification of housing — developers and interested parties treating our homes and our communities as assets to profit from.”
Dan Neumann studied journalism at Colorado State University before beginning his career as a community newspaper reporter in Denver. He reported on the Global North’s interventions in Africa, including documentaries on climate change, international asylum policy and U.S. militarization on the continent before returning to his home state of Illinois to teach community journalism on Chicago’s West Side. He now lives in Portland. Dan can be reached at dan@mainebeacon.com.
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